Value for money? 50-cent public transport fares mean economic benefits but higher costs

Mathew Elmas at The New Daily writes: Value for money? 50-cent public transport fares mean economic benefits but higher costs.

Queensland’s new 50 cent transit fare has now been endorsed by both major parties, so will survive the election. We discussed the fare previously in The Conversation.

The New Daily article notes:

But Miles has pointed to an underlying rationale, claiming economic benefits for households outweigh costs to taxpayers, and that higher public transport patronage will help lower emissions.

“It saves Queenslanders more than it costs the government because of all those extra people using public transport,“ Miles said.

Under a five-week trial of 50-cent fares, commuters saved about $37 million and took about 2.6 million more trips than the same period in 2023, according to government data.

The costs have been estimated at $150 million over six months, but will ultimately vary significantly over time depending on how many more people start using public transport.

Elmas sent over a few questions (in bold), my replies are below, some of which he included in the article

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1. Do you think the fare cuts are an effective way to boost the usage of public transport networks, or are there other investments in the PT network needed to drive a more persistent lift in availability and usage?

They will certainly boost public transport use, which is useful if the vehicles are under capacity. Given a train or bus is running and is not full, filling an extra seat is usually not very expensive (very little additional energy cost from the additional passenger, some small additional delays to pick up and drop off the bus passenger), so that’s beneficial. When vehicles are full however, the additional passengers can slow down the trip for everyone else (and there are more other people being delayed, so the total marginal cost increases) and other passengers suffer more discomfort from crowding.

This solves a problem for people well served by existing networks who were sensitive to the price. Many people live in places that aren’t as well served, and price is not the dominant reason they don’t use PT, but instead it is travel time. This policy alone (and isn’t expected to) substitute for additional investments that add accessibility to new destinations for more people.

2. Stephen Miles has said that the cheap fares are value for money because they benefit PT users more than it costs the government to lower the price, what do you make of that claim?

Politicians say lots of things. The government loses revenue from e.g. 80% of the passengers continuing to use PT from before the cuts, and gains some revenue from the 20% or so new passengers. In one sense, this is a transfer from the government to previous and continuing PT users. In another sense, the costs remain, and now they are being paid for by general revenue, which means all other people in the state, including the vast majority of people who are still not using PT regularly.  Those people  are either paying more taxes, or some other service is cut.  Some of them might benefit if congestion drops a little bit, but most receive no direct benefit. This doesn’t mean it is a bad policy, but it certainly doesn’t guarantee it is a good one.

3. With QLD making the cut price fares ongoing and Canberra experimenting with free fares, do you think other states such as Victoria and NSW might consider cutting their own fares, or are the economics behind their networks different?

Victoria has had a capped regional fare since 2023:

According the article it led to an increase in use.

NSW has daily, and more importantly, weekly caps  as well.

It is important to remember that transit fares come nowhere close to covering operating costs, much less the capital costs.

Of course there are plenty of other services that aren’t charged for either.

FIN